Chapter 3 Flashcards

(49 cards)

1
Q

Financial Ratios

A

Profitability ratio
liquidity ratio
solvency ratio

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2
Q

relate to the companys performance in the current period

A

profitability ratios

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3
Q

it shows the companys ability to generate income

A

profitability ratio

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4
Q

relate to the companys short term survival

A

liquidity ratios

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5
Q

it shows the companys ability to use current assets to repay liabilities as they become due

A

liquidity ratios

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6
Q

it measures the short-term ability of the enterprise to pay its obligation and to meet unexpected needs for cash

A

liquidity ratios

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7
Q

relate to the companys long-run survival

A

solvency ratios

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8
Q

it shows the companys ability to repay lenders when debt matures and to make the required interest payments prior to the date of maturity

A

solvency ratio

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9
Q

Ratios in Profitability

A

Net profit margin or return on sales
Return on total assets
Return on Equity
Gross profit percentage
asset turnover
fixed asset turnover
earnings per share
price/earnings ratio (P/E)
Dividend yield
dividend pay-out

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10
Q

represents the percentage of revenue that ultimatelt makes it into net income, after deducting expense

A

net profit margin or return on sales

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11
Q

it determines the amount of income by owners

A

net profit margin or return on sales

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12
Q

efficiency with which assets are used to. operate a business

A

return on total assets

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13
Q

it compares the amount of net income to average stockholders equity

A

return on equity

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14
Q

it reports the net amount earned during the period as a percentage of each peso contributed by stockholders and retained in the business

A

return on equity

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15
Q

it indicates how much profit was made, on average, on each peso of sales after deducting the cost of goods sols

A

gross profit percentage

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16
Q

it indicates the amount of sales revenue generated for each peso invested in assets during the period

A

asset turnover

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17
Q

it indicates how much revenue the company generates for each peso invested in fixed assets

A

fixed asset turnover

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18
Q

it indicates the amount of earnings generated for each share of outstanding common stock

A

earnings per share

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19
Q

it indicates the number of pesos required to buy 1.00 or earnings

A

Price/Earnings Ratio

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20
Q

it measures the rate of return in the investors common stock investments

A

dividend yield

21
Q

it indicates the proportion of earnings distributed as dividends

A

dividend pay-out

22
Q

Ratios in Liquidity

A

Current ratio
quick ratio
cash ratio
receivables turnover
average age of receivables or days sales outstanding
inventory turnover
average age of inventory or days in inventory
raw materials inventory turnover
goods in process turnover
days in operating cycle
trade payables turnover
average age of trade payables or days in trade payables
cash conversion cycle
current asset turnover

23
Q

it measures the companys ability to pay its current liabilities

A

current ratio

24
Q

it is a measure of adequacy of working capital

A

current ratio

25
it is the primary test of solvency to meet current obligations from current assets
current ratio
26
what are quick assets
cash short term investments accounts receivable
27
this ratio is a much more stringent test of short term liquidity
quick ratio
28
it measures the number of times that the current liabilities could be paid with the available cash and near cash assets
quick ratio
29
it measures the number of times that the current liabilities could be paid using cash and marketable securities
cash ratio
30
It is the time required to complete one collection cycle from the time receivables are recorded, then collected, to the time new receivables are recorded again
receivables turnover
31
It indicates the average number of days during which the company must wait before receivables are collected
Average age of receivables or days sales outstanding
32
It indicates how frequently inventory is bought and sold during the year
Inventory turnover
33
It measures the number of times that the inventory is replaced during the period
Inventory turnover
34
It shows the average number of days needed to solve each purchase of inventory
Average age of inventory or days in inventory
35
It indicates how frequently raw materials are bought and used in production
Raw materials inventory turnover
36
It indicates how frequently goods in process are continued and finished
Goods in process turnover
37
Shows how long the operating cycle of the company is
Days in operating cycle
38
It is the time needed to turn cash into inventory, inventory into receivables, and receivables back into cash
? Days in operating cycle
39
It indicates the time required to complete one payment cycle from the time the payables are recorded then paid to the time new payables are recorded again
Trade payables turnover
40
It indicates the length of time during which payables remain unpaid
Average age of trade payables or days in trade payables
41
It shows the time from when the cash is used in operations to the time it is converted into cash again
Cash conversion cycle
42
It measures the movement and utilization of current assets to meet operating requirement
Current asset turnover
43
Ratios in Solvency
debt to assets times interest earned debt to equity ratio debt ratio equity ratio
44
It indicates the proportion of total assets that creditors finance
Debt to assets
45
It indicates how many times the company's interest expense was covered by its net operating income
Times interest earned
46
It determines the extent to which operations cover interest expense
Times interest earned
47
Proportion of assets provided by creditors compared to that provided by owners
Debt to equity ratio
48
Proportion of total assets provided by creditors
Debt ratio
49
Proportion of total assets provided by owners
Equity ratio